The Mexican company Hoteles City Express announced a strategic relationship with the US chain Marriott for the sale of its five brands, associated trademarks, domains and related intellectual property for 100 million dollars , which also contemplates the acquisition of other assets and liabilities linked to the marks.
In a statement sent to the Mexican Stock Exchange (BMV), the company explained that all owned and leased hotels will sign long-term franchise agreements with Marriott, while the franchise agreements of co-invested, franchised and operated properties will be assigned to the American company, with the option of signing a new contract.
As a result of the transaction, the corporate structure of Hoteles City will remain the same. The company will retain its operating contracts, development activities and ownership of its hotels. In addition, it expects all City Hotels brands to be endorsed with the “by Marriott” signature.
“This strategic relationship will put the City Hotels brands in the sights of international travelers, particularly those in the United States. Additionally, the strengthening of our financial position will allow us to overcome the weight that the stock currently carries due to a possible dilution event and incorporate 676 new rooms in the coming months,” said Luis Barrios, CEO of Hoteles City, quoted in a document.
City Hotels will migrate to Marriott’s global distribution system, with which it expects to improve profitability as a result of several cost synergies, such as savings in distribution channels, access costs and support for digital platforms and reservation systems, among others. Additionally, it expects the strategic relationship to present an opportunity to increase its revenues given access to Marriott’s international travelers.
The company believes that the injection of liquidity granted by the transaction will eliminate the need to raise additional capital, and will give it the opportunity to negotiate new terms and conditions for its syndicated loan.
Currently, Hoteles City has 144.5 million shares in treasury, issued during a capital increase in 2021, which are planned to be canceled as soon as the transaction is carried out.
The transaction has already been approved by the company’s board, and its closing is still subject to the approval of the Federal Economic Competition Commission (Cofece). City Hotels estimates that the transaction could close between the end of 2022 and mid-2023.
